Bitcoin, digital currency

Bitcoin

Bitcoin , digital currency created by an anonymous computer programmer or group of programmers known as Satoshi Nakamoto in 2009. Owners of Bitcoins can use various Web sites to trade them for physical currencies, such as U.S. dollars or euros , or can exchange them for goods and services from a number of vendors.

Nakamoto was worried that traditional currencies were too reliant on the trustworthiness of banks to work decently. Nakamoto proposed a digital currency, Bitcoin, that could serve as a medium of exchange without relying on any financial institutions or governments. The proposal was made in October two thousand eight in a paper published on the Bitcoin Web site, which had been founded in August 2008.

Bitcoin relies on public-key cryptography , in which users have a public key that is available for everyone to see and a private key known only to their computers . In a Bitcoin transaction, users receiving Bitcoins send their public keys to users transferring the Bitcoins. Users transferring the coins sign with their private keys, and the transaction is then transmitted over the Bitcoin network. The time of each transaction is recorded so no Bitcoin can be spent more than once at the same time. The identities of the users remain relatively anonymous, but everyone can see that certain Bitcoins were transferred.

Fresh Bitcoins are created by users running the Bitcoin client on their computers. The client “mines” Bitcoins by running a program that solves a difficult mathematical problem in a file called a “block” received by all users on the Bitcoin network. The difficulty of the problem is adjusted so that, no matter how many people are mining Bitcoins, the problem is solved, on average, six times an hour. When a user solves the problem in a block, that user receives a certain number of Bitcoins. The elaborate procedure for mining Bitcoins ensures that their supply is restricted and grows at a steadily decreasing rate. About every four years, the number of Bitcoins in a block, which began at 50, is halved, and the number of maximum allowable Bitcoins is slightly less than twenty one million. As of early two thousand fourteen there were more than twelve million Bitcoins, and it is estimated that the maximum number will be reached around 2140.

Because the algorithm that produces Bitcoins makes them at a near-constant rate, early miners of Bitcoins obtained them more often than later miners because the network was petite. The premium that early users received and Nakamoto’s muffle after two thousand eleven led to criticism of Bitcoin as a Ponzi scheme , with Nakamoto benefiting as one of the very first users. (An analysis of the very first 36,289 mined blocks displayed that one miner, believed to be Nakamoto, had accumulated over one million Bitcoins. However, as of 2014, those Bitcoins, then valued at $600 million, remained unspent.) Defenders of Bitcoin claim that early users should receive some comeback for investing in an unproven technology.

The value of Bitcoins relative to physical currencies fluctuated insanely in the years following its introduction. In August two thousand ten one Bitcoin was worth $0.05 (U.S.). Beginning in May 2011, the Bitcoin enhanced sharply in value, reaching a peak of about $30 that June, but by the end of the year the value of a Bitcoin had collapsed to less than $Trio. However, Bitcoin began to attract the attention of mainstream investors, and its value climbed to a high of over $1,100 in December 2013. Some companies even began building computers optimized for Bitcoin mining.

With the marked increase in value, Bitcoin became a target for hackers, who could steal Bitcoins through such means as obtaining a user’s private key or stealing the digital “wallet” (a computer file recording a Bitcoin balance). The most spectacular theft was exposed in February two thousand fourteen when Mt. Gox, which had been the world’s third largest Bitcoin exchange, proclaimed bankruptcy because of the theft of about 850,000 Bitcoins, then valued at about $500 million.

Bitcoin, digital currency

Bitcoin

Bitcoin , digital currency created by an anonymous computer programmer or group of programmers known as Satoshi Nakamoto in 2009. Owners of Bitcoins can use various Web sites to trade them for physical currencies, such as U.S. dollars or euros , or can exchange them for goods and services from a number of vendors.

Nakamoto was worried that traditional currencies were too reliant on the trustworthiness of banks to work decently. Nakamoto proposed a digital currency, Bitcoin, that could serve as a medium of exchange without relying on any financial institutions or governments. The proposal was made in October two thousand eight in a paper published on the Bitcoin Web site, which had been founded in August 2008.

Bitcoin relies on public-key cryptography , in which users have a public key that is available for everyone to see and a private key known only to their computers . In a Bitcoin transaction, users receiving Bitcoins send their public keys to users transferring the Bitcoins. Users transferring the coins sign with their private keys, and the transaction is then transmitted over the Bitcoin network. The time of each transaction is recorded so no Bitcoin can be spent more than once at the same time. The identities of the users remain relatively anonymous, but everyone can see that certain Bitcoins were transferred.

Fresh Bitcoins are created by users running the Bitcoin client on their computers. The client “mines” Bitcoins by running a program that solves a difficult mathematical problem in a file called a “block” received by all users on the Bitcoin network. The difficulty of the problem is adjusted so that, no matter how many people are mining Bitcoins, the problem is solved, on average, six times an hour. When a user solves the problem in a block, that user receives a certain number of Bitcoins. The elaborate procedure for mining Bitcoins ensures that their supply is restricted and grows at a steadily decreasing rate. About every four years, the number of Bitcoins in a block, which began at 50, is halved, and the number of maximum allowable Bitcoins is slightly less than twenty one million. As of early two thousand fourteen there were more than twelve million Bitcoins, and it is estimated that the maximum number will be reached around 2140.

Because the algorithm that produces Bitcoins makes them at a near-constant rate, early miners of Bitcoins obtained them more often than later miners because the network was puny. The premium that early users received and Nakamoto’s muffle after two thousand eleven led to criticism of Bitcoin as a Ponzi scheme , with Nakamoto benefiting as one of the very first users. (An analysis of the very first 36,289 mined blocks displayed that one miner, believed to be Nakamoto, had accumulated over one million Bitcoins. However, as of 2014, those Bitcoins, then valued at $600 million, remained unspent.) Defenders of Bitcoin claim that early users should receive some come back for investing in an unproven technology.

The value of Bitcoins relative to physical currencies fluctuated insanely in the years following its introduction. In August two thousand ten one Bitcoin was worth $0.05 (U.S.). Beginning in May 2011, the Bitcoin enhanced sharply in value, reaching a peak of about $30 that June, but by the end of the year the value of a Bitcoin had collapsed to less than $Trio. However, Bitcoin began to attract the attention of mainstream investors, and its value climbed to a high of over $1,100 in December 2013. Some companies even began building computers optimized for Bitcoin mining.

With the marked increase in value, Bitcoin became a target for hackers, who could steal Bitcoins through such means as obtaining a user’s private key or stealing the digital “wallet” (a computer file recording a Bitcoin balance). The most spectacular theft was exposed in February two thousand fourteen when Mt. Gox, which had been the world’s third largest Bitcoin exchange, announced bankruptcy because of the theft of about 850,000 Bitcoins, then valued at about $500 million.

Related video:

Leave a Reply

Your email address will not be published. Required fields are marked *

*